sorry, sub-prime lending may very well have been a part of the process, but it was the derivatives that caused the economy to fail, not homes. If homes were to blame, then we should all be further in the hole as the housing market is still going down. Derivatives and the massive leverage they provided is what caused this mess. Bear Sterns and Lehman Bros bears this truth out.
Derivatives that the rating agency's pretty much BEGGED the banks to keep putting out. More AAA they issue, the more $ they get. See the conflict of intrest? The rating agency's also didn't take into account how much collateral the insurers (writers of the derivative contracts) had set aside in the event of a credit event, which as any insurance company knows, you need to have reserves. More demand comes into the space, the more the rating agency's rate AAA. So, there is plenty of blame to throw around, not just the banks. And the sad thing is, everyone and their mother still trust the rating agency's..and they have rated AAA on some questionable commercial paper as of recently...
And to address your "homes are not to blame" statement. The reason the CDS's on MBS's even existed was because of all the crazy lending going on that the GOVERNMENT was pushing for (more specifically democrats with the "everyone needs to be equal!!" bs), thus the "houses" were the direct component of it..
btw, anyone ever hear of the Community Reinvestment Act?
"The
Community Reinvestment Act is a
United States federal law designed to encourage commercial
banks and
savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods"
Everyone pisses and moans about the banks getting the bailouts..they got the bailouts because the GOVERNMENT was the DIRECT COMPONET of their lending practices. The banks would have got penalized if they didn't loan to risky borrowers.
In my opinion the blame goes
1. Government
2. Rating Agency's
3. Banks
